What does a steep yield curve typically indicate about future economic growth?

A steep yield curve typically indicates a positive outlook for future economic growth. When the yield curve is steep, it suggests that investors expect higher interest rates in the future, which often accompanies stronger economic growth. This anticipation can arise from various factors, such as increasing consumer demand, rising business investments, and overall optimism about the economy's performance.

In a steep yield curve scenario, the difference between short-term and long-term interest rates widens. This is often due to expectations of increased inflation and robust economic activity, leading to a higher demand for capital. As businesses and consumers borrow more to invest and spend, it fuels growth, making the steep curve a reflection of anticipated prosperity.

The other options do not align with the implications of a steep yield curve. Slow economic growth, stagnation, or recession are typically associated with either flat or inverted yield curves, where the short-term rates are higher than long-term rates, signaling a lack of confidence in future economic conditions. Therefore, a steep yield curve is seen as an encouraging signal of robust economic performance ahead.